Centric Health has 79% upside: Canaccord Genuity

Ahead of the company’s third quarter results, Canaccord Genuity analyst Neil Maruoka is feeling bullish about Centric Health (Centric Health Stock Quote, Chart, News: TSX:CHH).

Next week, Centric Health will report its Q3, 2017 results.

Maruoka expects the company will generate EBITDA of $4.9-million on a topline of $45.1-million, slightly better than the street’s expectation of a $44.5-million topline, but falling short of the consensus EBITDA expectaton of $5.2-million. The analyst expects a key part of the company’s business will be ramping back up.

“Specialty Pharmacy revenue was negatively impacted in the second quarter by technological challenges that slowed the on-boarding of new contracts,” the analyst says, “Although these issues have lingered into the current quarter, we nonetheless expect Specialty Pharmacy revenue to again accelerate in Q3. Adjusted EBITDA is estimated to be $4.9 million in Q3, representing YoY growth of 17%, but flat compared to the previous quarter; our forecast is modestly lower than the Street estimated adjusted EBITDA of $5.2 million. Centric continues to win new Specialty Pharmacy contracts as it prepares to accelerate the on-boarding of new beds in Q4. With a huge opportunity awaiting in the Quebec market next year, we believe there remains substantial upside for the stock as investors begin to see the torque from Centric’s capital-light growth strategy.”

In a research update to clients Monday, Maruoka maintained his “Buy” rating and one-year price target of $1.20 on Centric Health, implying a return of 79.1 per cent at the time of publication.

The analyst thinks Centric Health will generate EBITDA of $19.9-million on revenue of $181.5-million in fiscal 2017. He expects those numbers will improve to EBITDA of $27.4-million on a topline of $221.3-million the following year.